Rethinking Oil and Gas Industry: An Institutional Economics Analysis

Abstrak

Indonesia has been active in oil and gas for more than 125 years and is a significant player in the industry. Oil and gas is a vital part of the Indonesia economy. It is the largest contributor to state revenues. However, as oil and gas development has stalled, state revenue has declined and industry has experienced a dramatic backtracking. Mineral development is a long-term investment, large capital investments, high risks whose benefits are usually reaped well into the future. The article attempts, first, to evaluate the regulatory framework created by the laws of 2001 in terms of economic efficiency considerations; and second, to determine what still needs to be done to improve the current situation. This article seeks to set up alternative regulatory strategies, including the criteria for determining sound regulatory institutional economics practice.